Can Personality Type Explain Heterogeneity in Probability Distortions?

34 Pages Posted: 12 Apr 2012 Last revised: 31 Oct 2012

See all articles by C. Monica Capra

C. Monica Capra

Claremont Graduate University

Bing Jiang

Department of Economics and Business, Virginia Military Institute

Jan Engelmann

University of Zurich - Faculty of Economics, Business Administration and Information Technology

Gregory Berns

Emory University

Multiple version iconThere are 2 versions of this paper

Date Written: July 15, 2012

Abstract

There are two regularities we have learned from experimental studies of choice under risk. The first is that the majority of people weigh objective probabilities non-linearly. The second regularity, although less commonly acknowledged, is that there is a large amount of heterogeneity in how people distort probabilities. Despite of this, little effort has been made to identify the source of heterogeneity. In this paper, we explore the possibility that the probability distortions are linked to the personality profile of the decision maker. Using four widely utilized personality tests, we classify participants into three distinct personality types and find that these types have different risk characteristics. Particularly, the trait of motivation plays a role in explaining the attraction of gambling, while the trait of impulsiveness affects the discriminability of non-extreme probabilities. Our results suggest heterogeneity in probability distortions may be explained by personality profiles, which can be elicited though standard questionnaires.

Keywords: Choice under Risk, Personality, Experiments, Probability Weighting Function

JEL Classification: D03, C91, C83

Suggested Citation

Capra, C. Monica and Jiang, Bing and Engelmann, Jan and Berns, Gregory, Can Personality Type Explain Heterogeneity in Probability Distortions? (July 15, 2012). Available at SSRN: https://ssrn.com/abstract=2038687 or http://dx.doi.org/10.2139/ssrn.2038687

C. Monica Capra (Contact Author)

Claremont Graduate University ( email )

170 E. Tenth Street
Claremont, CA 91711
United States

Bing Jiang

Department of Economics and Business, Virginia Military Institute ( email )

Virginia Military Institute
335 Scott Shipp Hall
Lexington, VA 24450
United States
540-464-7451 (Phone)
540-464-7005 (Fax)

Jan Engelmann

University of Zurich - Faculty of Economics, Business Administration and Information Technology ( email )

Zurich, 8006
Switzerland

Gregory Berns

Emory University ( email )

201 Dowman Drive
Atlanta, GA 30322
United States

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